Flood Risk and Logistics Adaptation: A Structural Analysis of Route Choice and Inventory Buffers Among SMEs
DOI:
https://doi.org/10.24191/jibe.v11i1.11087Keywords:
Flood risk, Route choice, Inventory buffers, SME logistics adaptation, Supply chain resilienceAbstract
Recurring flooding has become a structural operating risk for firms in monsoon-affected regions, yet empirical evidence on how small and medium-sized enterprises (SMEs) adapt logistics decisions under such conditions remains limited. This study examines how flood exposure shapes route choice and inventory buffering among SMEs in Terengganu, Malaysia. Using firm-month panel data and a structural estimation framework, the analysis models route choice and inventory buffers as jointly determined adaptation mechanisms rather than independent responses. The findings show that higher flood exposure increases the likelihood of avoidance routing, indicating that route choice functions as a deliberate risk-management strategy. While flood exposure is associated with higher inventory buffers in naïve models, this effect attenuates once route choice endogeneity is addressed. Structural estimates reveal a substitution mechanism whereby routing flexibility reduces reliance on costly inventory buffers. These results highlight that SME resilience under climate risk reflects constrained optimization between avoidance and absorption strategies, with important implications for managerial practice and infrastructure policy in flood-prone regions.
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Copyright (c) 2026 Mohamad Shukri Johari, Mohd Ariff Kamaludin, Saiful Azmir Kasdi, Norina Ahmad Jamil, Azilah Anis, Mohd Hafiz Zulfakar, Hairin Nisa Meor Nordin, Nur Rahmas Mohd Saman
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